10 Reasons Why Fisker May Be Worse Than Solyndra
This story has been updated below.
Automotive and green technology advocacy Web sites are abuzz with a story about a former employee of Fisker Automotive who claims the company released its $102,000-plus Karma electric sport sedan prematurely, in order to meet targets set forth by the Department of Energy so Fisker could access funds from a $529 million loan award.
This followed reports from all over the Internet that Consumer Reports purchased a Karma in Connecticut for $107,850, only to see it totally disabled before the magazine could run it through its tests.
The whistleblower story originated on the pro-Clean tech Web site Gigaom.com, and was written by electric vehicle cheerleader Katie Fehrenbacher. According to her report, “The former Fisker employee said that it wasn’t uncommon for the first Karma cars to have technical issues, and said that was one reason for leaving Fisker — the employee now works at electric car company Coda.” Fisker has drawn $193 million on the DOE loan, with the last reimbursement in May 2011, but can no longer access those funds because of its failure to attain other milestones under the loan agreement.
No one has speculated publicly who the whistleblower might be, so I will. A likely suspect is Coda’s senior vice president of engineering, Thomas Fritz. According to his bio, Fritz headed Fisker’s engineering department for more than three years, and before that had 23 years automotive engineering experience that included Ford, BMW and Rolls Royce. So if anybody is in the position to say authoritatively that the Karma was released before it was ready, it’s Fritz.
The timing makes sense too. Fritz left Fisker in March last year, the same month the Karma was put into production. He landed at Coda in June, only a month after Fisker received its last payment from the DOE loan. Besides the need to meet DOE expectations, Fisker may have responded to market pressures as well.
“A lot of our deposit-holders have been waiting two years or more for their cars,” Fisker spokesman Roger Ormisher told Edmunds in March 2011. “We really want to give them firsthand experience with what the Fisker Karma is all about before they finalize their orders and pick trim and color and everything else.”
If the company didn’t come up with something soon, did they run the risk of having to refund down payments to the likes of Leonardo DiCaprio and Al Gore?
1. DOE, under Secretary Steven Chu, awarded Fisker a $529 million loan guarantee to produce a vehicle – the Karma – that retails for a $102,000 base price. If the average owner of the $41,000 Chevy Volt earns $170,000 per year, it’s logical to conclude this will subsidize the purchase of a luxury car for the very wealthy.
2. Among Fisker’s highest profile backers is the Silicon Valley venture capital firm Kleiner, Perkins, Caufield and Byers, which boasts Gore as a senior partner, and whose employees have donated $2.6 million to candidates and political action committees, favoring Democrats over Republicans by a very wide margin, according to the Center for Responsive Politics. Fisker’s raisers of private capital are Keith Daubenspeck and Dwight Badger of Chicago-based Advanced Equities, Inc., who have been accused of “foisting junky startups on investors” and are now the subjects of a Securities and Exchange Commission investigation.
3. KPCB spent $50,000 per quarter throughout 2009 and 2010 lobbying Congress on legislation that was heavy-laden with renewable energy government incentives, and Fisker lobbied Congress, the White House and the Departments of Energy and Defense – spending $190,000 in 2009, $480,000 overall – to seek funds through DOE’s loan program, among other things.
4. The law firm that reviewed Fisker’s loan for DOE was Debevoise and Plimpton, whose employees gave nearly $200,000 for President Obama’s campaign in 2008. Debevoise was paid $1.8 million by DOE to negotiate loan terms and conduct due diligence on the Fisker loan and another to Ford Motor Company.
5. Despite receiving $193 million from taxpayers to create U.S. “green” jobs, the Karma is assembled in Finland.
6. Doing the politician thing, the Obama administration took credit for the new “green” jobs they would create as Vice President Biden visited a former General Motors plant in Delaware that Fisker planned to overhaul to produce its Nina model.
7. Despite having access to more than $1 billion total -- according to previous reports that include Fisker’s own admission -- the company terminated 65 employees in February, and stopped the Delaware renovations.
8. Fisker’s shortcomings and mismanagement are contributing to the troubles – and perhaps the eventual downfall – of its battery supplier, A123 Systems, which let go 125 of its plant workers in November. Don’t feel bad for the owners of A123 though, who have received at least $279 million in grants from DOE, as they took care of themselves nicely with raises and parachutes after the factory firings.
9. Consumer Reports bought a Karma to test at its facility, and the vehicle died during its check-in. “We buy about 80 cars a year and this is the first time in memory that we have had a car that is undriveable before it has finished our check-in process.”
10. A former Fisker employee – possibly its head of engineering – said the company rushed the Karma to market before all its technological problems had been resolved, in order to capitalize on its DOE loan.
Of course many of these points also apply to Solyndra, but the only reasons Fisker has not superseded Solyndra on the disaster scale is because it has not declared bankruptcy yet and it has received a little less money (although it was "awarded" about the same amount). But with A123, it may turn out to be “two Solyndras for the price of one,” as Forbes described it.
It doesn’t stop there – other undeserving, failed companies like Abound Solar, Ener1, and Beacon Power have received taxpayer grants or backing from DOE under Secretary Chu. The administration of stimulus funds on his watch has been inept at best and corrupt at worst. With his bungling on the gas prices issue, he is both a political and practical liability.
He is, however, the perfect representation of the administration’s priorities and practices. He truly needs to leave, but he’s not the only one.
Update 9:10 a.m., 3/16/2012: Fisker believes the so-called whistleblower in the Gigaom.com article to be a former employee of a dealership, not of the company, and calls his allegations "absolutely untrue."
Paul Chesser is an associate fellow for the National Legal and Policy Center.